The key to saving money is to spend less than you make on a regular basis. It’s simple in theory, yet many of us fail to put cash aside for a rainy day, leaving us without a financial buffer for emergencies.
To put this into perspective, more than 40 percent of the UK population has less than £100 in savings, a figure that’s both worrying and inevitable given the rising cost of living. So does this mean that some of us are just doomed to live without savings forever?
On the contrary, you don’t have to have much disposable income in order to start saving for the future, and your lack of spare money is probably not the only thing holding you back. Here are eight beginner’s tips for creating a financial safety net, starting today.
Start Small
The prospect of saving money can be daunting, so the key is to start small and work up from there. If you try to save £200 every month when you’re used to saving nothing, chances are you’ll have to eat into the money because you’ve tried to adjust your lifestyle too quickly.
Even if you just save £1, that’s £1 less than you saved last month, and you probably still have a roof over your head and food on your plate. Would the same be true if you upped your savings to £5 per month, or £10? It may not seem like a lot, but over time those small deposits can really add up.
Pay Off Your Debts
Let’s face it: if you’re in the middle of a financial emergency and you have no savings to fall back on, you’re going to need to borrow money to tide you over. You can either use a reliable and affordable payday loans website or approach your bank or family member for a loan, but you must then start paying off these debts before depositing money into your savings.
Many of us have substantial debts that might take years or even decades to clear, but as long as you’re making small repayments, there’s no reason why you can’t continue to save at the same time.
Set Up a Savings Account
Most people have good intentions of setting up a savings account; they just never get around to it. If you know you want to start saving, then set up a dedicated account today, before you get distracted by something else on your to-do list. If you have a current account established, ask your bank about opening a savings account. Just bear in mind that some banks have minimum balance requirements, so this is something to check if you’re planning to start small.
If you’re approaching a new bank, look out for a local financial institution with a no minimum balance account. Some will even give you money for signing up, so this is a great way to start accumulating funds.
Automate Your Deposits
Once you’ve opened your savings account, set up an automatic transfer for the monthly amount you want to save, and do it as close as you can to the date you get paid each month. It doesn’t matter how low that amount is at this point – the idea is that you’re making a start. If you make more money than planned one month, you can always transfer extra funds.
Prove to Yourself That You Can Save
Once you’ve saved a small amount for a few consecutive months, you’ll have proved to yourself that you can save and survive at the same time, however small your savings balance. Training yourself to be good with money and save responsibly is hard work; so don’t expect miracles at the beginning. It doesn’t matter whether you’re putting aside £10 or £100 – what matters is that you’re now someone who saves money every month.
Create a Budget
If you don’t already have a budget for your living expenses, now’s the time to create one. You can download free online budget planners from the Internet, or you can use Excel to create one of your own. Make sure you include any day-to-day expenses like coffees on the way to work, bus fares and money for taxis and socialising, as well as your rent, utilities and household costs. Be honest with yourself here – if you spend £100 a month on takeaway meals, then put that in your budget. There’s no use sugar-coating the truth at this stage. The idea is to see where your money is going, and if there any expenses you can cut.
Minimise Your Spending
Most people fail to save because they spend everything they earn in a month. If you’re serious about building a savings account, however, you’ll need to look at minimising your spending so you can meet your financial goals.
You don’t need to drastically overhaul your life by moving to a cheaper home or finding a higher paid job – unless you want to, of course. Even cutting out small expenses, in the beginning, can add up to substantial savings in the long run. If you spend £2 on takeaway coffee five times a week, for example, cutting this from your budget will give you an extra £40 a month to save – that amounts to £480 a year.
Be Realistic
Don’t expect yourself to give up everything you enjoy just to start saving money. If you make too many sacrifices to your lifestyle, the chance of you following through with your plan is slim. You need to know that you can save money while still enjoying the occasional meal out, drinks at the pub or new outfit, otherwise you’ll quickly lose your motivation.
Learning to save money can be difficult, particularly if you don’t have a lot to spare. However, you don’t need to put much aside each month in order to see a significant change to your finances. By making a plan and budgeting for your lifestyle, the money in your account will quickly grow, leaving you in a much better position to tackle life’s unexpected events.
